Knowee
Questions
Features
Study Tools

Question 3Assume a firm earns net income of $10,000 with total assets of $200,000 - half of which is debt - and has 20,000 shares outstanding. Based on this information, its EPS (earnings per share), ROA (return on assets) and ROE (return on equity) are respectively:1 point$2.00; 5%; 10%$2.00; 10%; 5%$0.50; 5%; 5%$0.50; 5%; 10%None of the above

Question

Question 3Assume a firm earns net income of 10,000withtotalassetsof10,000 with total assets of 200,000 - half of which is debt - and has 20,000 shares outstanding. Based on this information, its EPS (earnings per share), ROA (return on assets) and ROE (return on equity) are respectively:1 point2.00;52.00; 5%; 10%2.00; 10%; 5%0.50;50.50; 5%; 5%0.50; 5%; 10%None of the above

🧐 Not the exact question you are looking for?Go ask a question

Solution

To answer this question, we need to calculate each of the three financial metrics: EPS, ROA, and ROE.

  1. EPS (Earnings Per Share) is calculated by dividing the net income by the number of shares outstanding. In this case, it would be 10,000/20,000shares=10,000 / 20,000 shares = 0.50 per share.

  2. ROA (Return on Assets) is calculated by dividing the net income by the total assets. In this case, it would be 10,000/10,000 / 200,000 = 0.05 or 5%.

  3. ROE (Return on Equity) is calculated by dividing the net income by the shareholders' equity. In this case, since half of the total assets is debt, the other half is equity. So, it would be 10,000/(10,000 / (200,000 / 2) = 0.10 or 10%.

So, the correct answer is $0.50; 5%; 10%.

This problem has been solved

Similar Questions

All other things being equal, according to the Du Pont model, if a firm’s Return on Assets (ROA)  has been decreasing but it’s Asset Turnover has been increasing, then its Profit Margin has been:Group of answer choicesIncreasingUnable to determine based on the information givenDecreasingRemaining the same

All other things being equal, according to the Du Pont model, if a firm’s Return on Equity (ROE) has been increasing and it’s Leverage has been decreasing, then its Return on Assets (ROA) has been:Group of answer choicesIncreasingDecreasingUnable to determine based on the information givenRemaining the same

The value of a firm is equal to the value of its Blank______.Multiple choice question.current assets minus current liabilitiesretained earnings plus short-term debtdebt plus equityreputation

Question 3Ifthe same firm was issued $4,000 of debt, it would have an EPS of $ _____.

PTM Bank has a Return on Equity (ROE) of 16% and a Return on Assets (ROA) of 6%. FIM Bank has a Return on Equity (ROE) of 18% and a Return on Assets (ROA) of 4%. Based on this information, which of the following is CORRECT?Group of answer choicesPTM Bank has a profit margin of 28% and an Asset Utilisation Ratio of 10.71%FIM Bank has a profit margin of 27% and an Asset Utilisation Ratio of 14.81%FIM Bank has an equity multiplier of 6.67PTM Bank  has a profit margin of 17.00% and an Asset Utilisation Ratio of 27.78%

1/3

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.